Online disadvantage is $23 billion and expanding

Offering testimony before the Senate Finance Committee was Katherine Lugar, EVP public affairs for the Retail Industry Leaders Association (RILA), on the subject of e-fairness and legislation known as the Main Street Fairness Act. The bill would close a loophole that has U.S. brick-and-mortar retailers at competitive disadvantage to online only companies. RILA supports passage of legislation that was introduced last year and could help states collect an estimated $23 billion in sales taxes that currently go unpaid because only retailers aren’t required to collect them on behalf of states.

“A sale is a sale is a sale. Whether it takes place online or at a local business, the same rules should apply online that apply on Main Street,” according to Lugar’s prepared testimony.

The trade group contends the current $23 billion in sales that that goes uncollected will only grow larger in the years ahead as e-commerce continues to grow. According to RILA, a pre-Internet loophole prevents states from enforcing their sales tax collection laws when purchases are made online. Consequently, while local retailers collect and remit sales taxes on purchases made in their stores, their out-of-state online competitors do not. The result is what RILA charitably referred to as a, “perceived price advantage of between 6% and 10%.”

For background on the issue and to read Lugar’s full testimony, click here.

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